Market could get a boost as states reopen, but new economic data will show just how bad things got during shutdowns

Stocks are likely to hang on every medical development and the progress of state reopenings, but there will also be some key economic data in the coming week that should provide a glimpse into the depths of the state shutdowns.

The Fed’s beige book of economic activity is released Wednesday afternoon. There is also April manufacturing data in durable goods Thursday and April’s consumer income and spending data Friday. While that should provide an interesting view of how sluggish activity became, the market is expected to focus more on May consumer confidence Tuesday and consumer sentiment Friday.

“The backward looking data is not going to get any attention paid to it,” said Ed Keon, chief investment strategist at QMA. “It’s going to be terrible, and that’s not going to be a surprise. Confidence has held up pretty well, all things considered. It’s the PPP and unemployment benefits. People who get some support for income seem to be pretty confident.” Congress is expected to take up changes to the Paycheck Protection Program for small business when it returns June 1.

April’s economic data is expected to be about the worst of the recession, since most state shutdowns extended through a good part of the month, ahead of May reopenings. First quarter gross domestic product is expected to have declined by 4.8% when a second reading is released Wednesday, but for the second quarter, GDP is expected to decline by a median 33.1%, according to CNBC/Moody’s Analytics Rapid Update, a survey of economists.

The S&P 500 was heading for a weekly gain of 3%, its second weekly gain in three. A big catalyst came Monday, when Moderna disclosed positive data from a small group of patients in an early trial, but it was a wild week of trading for the company’s stock as doubts arose about its limited results. On Friday, however, White House health advisor Dr. Anthony Fauci said the data showed promise and he was cautiously optimistic a vaccine would be developed.

Astra Zeneca’s vaccine effort got a boost this week when it received $1 billion from the U.S. Health Department’s Biomedical Advanced Research and Development Authority to develop a coronavirus vaccine from the University of Oxford.

With investors focused on vaccines and state reopenings, market winners were the more volatile Russell 2000, up 7.8% for the week and the Dow Transports, up nearly 9.1% as airlines and other reopening stocks rallied. Airlines were up nearly 20% on the week. After a batch of earnings reports, retailers were also higher on the week, with the SPDR S&P Retail ETF up 6% for the week.

Keon said he is watching the economic reopenings and says the success really depends on the behavior of individuals, and whether there’s another spike in infections.

“People are still scared,” he said. “It’s the personal behavior that’s going to make a difference to economic behavior. We’ll get back to some semblance of normal. It’s going to take awhile for people to feel more confident.”

He expects to see a rebound of economic activity in the second half of the year, but not a V-shaped recovery.

“By the end of the year, if we don’t get a vaccine, we will have made a lot of progress on a vaccine. I’m still cautiously optimistic that the market can hang in, and maybe end the year a little bit higher,” he said.

One big reopening in the week ahead will be on Tuesday when the iconic NYSE trading floor reopens.